Euro consolidates below mid-1.1400s as Hormuz risks support safe-haven USD
The EUR/USD pair kicks off the new week on a subdued note and oscillates in a narrow band below mid-1.1400s during the Asian session. Spot prices, however, remain within striking distance of a nearly two-week high, touched last Thursday, amid mixed fundamental cues.
Despite a fragile US-Iran interim agreement, tensions surrounding the Strait of Hormuz remain elevated as Iran seeks to tighten control over the strategic waterway. This keeps the geopolitical risk premium in play and offers some support to the safe-haven US Dollar (USD), which, in turn, is seen acting as a headwind for the EUR/USD pair.
The USD bulls, however, seem hesitant amid reduced bets for interest rate hikes by the US Federal Reserve (Fed) following the release of rather unimpressive US jobs data last week. In fact, the closely-watched US Nonfarm Payrolls (NFP) report showed that the economy added only 57K new jobs in June, compared to the 110K expected.
Adding to this, the previous month's reading was revised down from 172K to 129K, while the Unemployment Rate edged lower to 4.2% in June. This comes on top of easing inflation fears in the face of the recent slump in Crude Oil prices and shifted market expectations from one to two Fed rate increases in 2026 to between zero and one hike.
This, along with a generally positive tone around the equity markets, keeps a lid on any meaningful appreciation for the USD and should limit the downside for the EUR/USD pair. Meanwhile, softer Eurozone inflation data forced investors to reduce bets on further European Central Bank (ECB) rate hikes, warranting caution for aggressive bulls.
Monday's economic docket features German Factory Orders, Eurozone Sentix Investor Confidence, the monthly Producer Price Index (PPI), and Retail Sales. Later during the early North American session, the release of the US ISM Services PMI, along with speeches from influential FOMC members, could provide some impetus to the EUR/USD pair.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Wall Street giants collectively raise rate hike forecasts, US Treasury futures continue to fall, gold drops over 1% to break 4000
After the US October CPI exceeded expectations, Goldman Sachs and Nomura added a forecast for an interest rate hike in March next year, while Deutsche Bank included a forecast for a rate hike in January next year. Currently, the market has fully priced in a 25 basis point rate hike in December, with a 13% probability for a 50 basis point hike. On Wednesday, the US Treasury spot market was closed, but Treasury futures continued to fall, with corresponding yields rising by about 2 to 4 basis points, and spot gold came under pressure, dropping by 1.1%.
No Need to Worry About the Cooling Down of AI Data Center Construction? The US Import Boom Is Unlikely to Subside in the Short Term, Real Impact May Come in 2029
It takes an average of 4.8 years from finalizing investment to starting construction of a data center project, and an additional 2.6 years from construction start to becoming operational. Servers usually cannot be installed until after the building structure and racks are completed. For trade partners such as Taiwan (China), South Korea, and Mexico who rely on US data center supply chain demand, the inertia in construction timelines provides at least a one- to two-year buffer for future exports.
Federal Reserve Major Debate: When Should the Tenure of “Number Three” Williams End?
The main point of contention is whether Williams should step down in June 2028, upon completing a full 10-year term, or in June 2027, when he reaches the mandatory retirement age of 65. Analysts point out that the Federal Reserve Board holds ultimate discretion; if he leaves early, Fed Chair Waller would be able to assert greater control over the appointment to this critical position. However, forcing Williams to shorten his term could easily be interpreted as political manipulation. Williams himself is expected to serve until June 2028.
Crypto prices
More
